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Collaboration in establishing regulations

The state of Colorado recently promulgated the first regulations in the United States requiring comprehensive and significant reductions of methane emissions from oil and gas production operations. Both the process and resulting substantive regulations may be used as precedent for similar regulatory developments in other states, the Federal government, and around the world.

In most jurisdictions in the United States, formal rules are typically developed by government agency personnel, published for public comment, and then adopted (frequently with revisions recommended by either the regulated community or other interested stakeholders) by the governing body. Frequently, governmental agencies involve interested stakeholders either informally or through a formal stakeholder process to further develop information and gain a myriad of perspectives prior to proposing regulations. Acknowledging the regulated community’s operational, technical, and economic expertise, agencies have historically sought significant stakeholder input from industry.

In the recent methane rulemaking in Colorado, the Colorado Air Pollution Control Division held a formal stakeholder process for interested stakeholders on the potential regulations over an eight month period. At the conclusion of the stakeholder process—a process that involved significant time and effort by both members of the regulated community and others– the Governor of the state of Colorado announced that a national environmental organization and three of Colorado’s largest oil and gas operators had collectively agreed to a set of proposed methane rules for the oil and gas industry that the State of Colorado was proposing to adopt.

Though the proposed methane rules collectively agreed to through the collaborative efforts of those organizations contained many of the same provisions as discussed in the stakeholder process, many additional and significant changes were included in the regulations proposed for adoption by the state of Colorado. Many of those changes and proposed provisions raised significant technical and operational concerns for the remaining members of the oil and gas industry in Colorado, particularly for smaller operators or operators in less oil-rich and productive areas. In an effort to seek revisions to reflect these technical and operational concerns, remaining members of the oil and gas industry participated in the public rulemaking process to formally evaluate and comment on the proposed rules. However, the collaborative effort between environmental organizations and three largest operators that produced the proposed rules was granted significant weight by the state of Colorado and the effort and results were praised as something to be applaused and rewarded. As a result, few revisions to the proposed rules offered throughout the formal rulemaking process were adopted or even considered—a circumstance that has resulted in significant questions and uncertainties regarding implementation of the now adopted regulations.

The regulations were applauded as a significant success by the environmental community, and as a result, environmental organizations are seeking to mimic both the process and result in other jurisdictions within the United States. This model presents both interesting and challenging strategic and legal considerations moving forward in the regulation of the shale gas industry.